I do not know who said this, but it is an accurate assessment of our country’s situation. We have spent way, way too much over the last 30 years.
I heard an interesting analogy about what the government is doing. The usual procedure is for the government to use the people like a dairy cow, feeding itself like a parasite on the cow. But at some point the government started killing the cows and wondered why there was no milk.
Gerald Celente has been making the rounds on the alternative economic programs I watch. I chose this one because he got less excited than in some of his other appearances. His basic point is that crime is crime, and the big bankers are criminals. My title for today's post is not entirely accurate. The bankers got the chicken and all we got was some weak broth.
This video is rather odd—but it did seem an interesting viewing, and I needed another opera clip. Yes, such times may be coming, although I am not sure what the NIV translation of the Bible has to do with it!
The Bloomberg interview with John Taylor that I have embedded at the end of my blog today impressed me. He is very pragmatic about the situation we are in. I think that too many people expect the impossible. Germany seems to be in a particularly tough spot. To paraphrase Taylor, Germany needs to stop selling Mercedes to people by loaning them money to buy them. It is worse to make the Mercedes, and never get paid for it, than to not make the Mercedes at all. Germany is just starting to understand this, and they are not happy.
Taylor also used a baseball analogy for the Euro crisis. "We are only in the second or third inning," he said. I agree. This is why I have been calling this period the Great Recession. I did not invent the term of course, but I think that it may be more than a decade before things return to normal—or we adjust to what some are calling the new normal.
Things will slow down next year, no matter who is elected. But this is not the crisis I have been predicting. I am still hopeful we can avoid the crisis, or in any event minimize it with proper action: a combination of large spending cuts, tax increases, and quantitative easing (the Federal Reserve buying government debt).
Maybe like the Germans, I too am believing the impossible. Am I the economic equivalent of a televangelist? I hope not.
Each of these documentaries I have been recommending have been reusing the same clips, but to slightly different points. This one is more unusual as it is produced by North Korea! It is fun to watch the North Korean spin on the Korean War.
The most interesting point was that children by age 5 can identify 200 corporate logos. What are your children watching?
Marshall McLuhan once commented that if you asked a fish to describe its environment the last thing it would mention is the water.
Yes, I went on a little bit of a rant Saturday, but it seems to me that most people. like McLuhan's fish, do not see the water. There is a general unease about the situation, but no real concern to make changes.
One symptom is the crazy interest rates.
The interest rates in Spain and Italy are crazy, they are too "high." Paying around 7% with the high debt load is cutting into the budgets of these countries. This leads to more budget cuts. This leads to more economic troubles. This leads to less revenue. This leads to more budget cuts. I am not sure how these countries can get out of this cascade of negative feedback.
However, the reason for these high rates is the justified perception that these governments will default. Because of the risks, the "high" rates may in fact be too low.
Some countries have crazy low rates. Germany, Canada, and the United States actually have negative interest rates on very short term debt.
Since we are swimming in the low interest rate water, we do not think about what it means.
On a recent trip to Branson I was at the bank. An older man was there complaining. "Over one hundred thousand in the bank but the interest I get is less than one thousand." He is being stolen from by the Federal Reserve's low interest rate policy. Savers are penalized and borrowers benefited.
If we assume that the inflation rate reported by the government is correct, interest rates are very negative. The inflation rate is actually much higher than what is reported. If this is correct, then interest rates are very, very negative once taxes and loss of purchasing power is factored in.
Once you have a reserve for an emergency, pay down debt—savings in the financial market is making little sense right now.
Do it now. Pre-buy consumer goods. “Forever” first class stamps are an example of what I am talking about. It is not that I expect empty shelves. I don't. But the current financial markets are so fragile that one of the best investments you can make is consumer goods. If you have junk and clutter you aren’t using, have a yard sale or garage sale (if you have a garage) and sell that stuff. Then pre-buy food and consumer products with the money from the sale. Be sure to only buy stuff that you actually eat or will use. I have blogged about this before. You can't go wrong, as you can use or eat your investment.
Don't be like a fish. See the water and act.
Here is a discussion of interest rates by Marc Faber on the show Capital Account.
Friday, August 3, 2012 at 5:00AM 
I do not know who said this, but it is an accurate assessment of our country’s situation. We have spent way, way too much over the last 30 years. 
